Flood Re, the UK Government’s scheme to pool flood risk, launched this week, backed by £2.1bn in reinsurance. The initiative, which follows the principle of terrorism insurance fund Pool Re, intends to give around 350,000 homes in flood-prone areas access to affordable home insurance, but teething problems impacted the broker community’s ability to sell policies.
A lot of finger pointing took place at the launch of Flood Re, with software houses blaming insurers for delays and insurers blaming the software houses. The issue is that most insurers are offering Flood Re policies via their direct channels, seemingly at the expense of broker access to the same products.
Graeme Trudgill, executive director at BIBA, said “We’ve been in dialogue with the main insurers and software houses over the last few months and have repeatedly raised issues and concern over competition where it appears direct arms have been prioritised over broking channels. It is clear some providers are lagging behind others… We want Flood Re for brokers and we need the market to get it resolved as soon as possible.”
Although Flood Re shares similarities with Pool Re, it also has some unique features and requirements that have complicated the process. The main issue here is that because the fund is effectively created from a levy on council tax charges, council tax banding needs to be taken into consideration.
According to Trudgill, from the get go, a number of insurers are using systems that won’t automatically be able to accept Flood Re business via brokers. So BIBA is instead urging them to ensure that they have manual methods of processing quotes for flood risk properties.
According to the Association of British Insurers, the cost of drying and restoring a flooded home can cost from £20,000 to £40,000 on average. Few insurers are willing to take on the risks, leading to very high premiums.
A number of insurers have announced that they will be offering Flood Re-backed policies. These include Admiral
, Avantia, Aviva
, Cherish Insurance Brokers underwritten by Axa, Churchill, First Direct, Bank of Scotland, Legal & General, LV, Direct Line, More Than, Privilege, Halifax, Hiscox
, HSBC and Lloyds Banking Group.